Red Robin focuses on upgrades

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Executives say that effors to build the brand's bar business have not alienated families.

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Red Robin Gourmet Burgers Inc. reported a 10-percent decline in first-quarter profit on Tuesday but said an ongoing remodel program and tests of a smaller-footprint prototype are showing better-than-expected results.

Steve Carley, chief executive of the Greenwood Village, Colo.-based casual-dining chain, said the company is continuing transformation efforts to improve the guest experience and make the brand more relevant.

While value-driven promotions by competitors have been a challenge, Carley said, “Simultaneously there appears to be a growing bifurcation between brands that are relevant and differentiated and meeting guest expectations, and those that aren’t.

“Our goal,” he said, “is to serve more guests more often and leave them more delighted.”

The company has been testing upgraded units at various levels ranging from a bar-only revamp to a more comprehensive $400,000 overhaul that includes improved service and better food presentation, as well as a décor package that brings in more “elements of whimsy,” and enhanced patios.

The company is still evaluating what works, and new restaurant prototypes will be tested in two more sites this year, but Denny Marie Post, Red Robin’s senior vice president and chief menu and marketing officer, said, “We got a lot right.” The bar is a “cooler place to hang out,” she said, and efforts to build the bar business have not alienated families, for example.

Another 20 restaurants are scheduled to be remodeled this year, and Carley said some elements from the transformation effort will be pulled through the whole system. All Red Robin team members, for example, were asked to re-apply for their jobs based on new hiring specifications, he said. “Not everyone got rehired.”

In addition, since the fourth quarter last year, Red Robin has opened three smaller-footprint restaurants, which are about 4,000 square feet as opposed to the traditional 6,000-square-foot “big box” locations. Two more are under construction.

Carley said the company is very pleased with results from the smaller units, which offer more flexible real estate opportunities for the brand and have lower build-out costs while still providing the capacity for “healthy volumes.”

Of 20 new restaurants planned for 2013, seven will be the smaller units, Carley said.

The company is also planning to open “several” more of the fast-casual Red Robin Burger Works restaurants, which offer a streamlined menu and lower prices. Carley said he could not be specific about the number planned because competition is so stiff for the 2,000-square-foot end-cap locations needed, but the company is planning to continue tests of the secondary brand outside the company’s home market of Denver. The company operated five Burger Works at the end of the first quarter.